Types of Hard Money Loans

With all the information out there, the types of hard money loans available can be confusing. When determining the best course of action, it is best to be informed. With a variety of options, you will want to carefully consider what type of purchase you are most interested in. Whether looking to purchase an apartment complex or start a commercial development project, a hard money loan may make your process go quickly. Learn about the various types of options available to buyers.

Apartment Building. Also known as multi-family housing, this type of property can be considered residential or commercial, depending on zoning. Buildings with five or more units or complexes of multiple apartment buildings fall into this category. The owner owns all land, buildings, individual units, and amenities. When looking to purchase or renovate an apartment building or complex, a hard money loan can come in very handy. Often a quick turnaround on a purchase is necessary. A multi-family apartment building is an appealing investment since the cash flow is higher and operating cost is less influenced by a tenant vacating.

Commercial Building. With many commercial property options available, business owners often need to acquire a location and building that meet their needs. Office properties can include medical and executive businesses. Retail properties include strip center businesses, inline retail, and regional malls. Whether a sole owner or part of a partnership, hard money loans can speed up the process of owning the location, making it faster to get the business up and running.

Commercial Construction and Development. Developing a new building, resort or complete location for a business is a big undertaking. Large sums are needed to pay contractors and builders. From inspections to supplies and unexpected costs, it can be scary to think of how much money you will need. Hard money loans can make a big difference of turning your dream into your reality. Often, hard money loans close in as short as ten days.

Real Estate Development. When looking to add value to a property, and then sell it for a profit it is often called a value-added deal. The case of flipping a home by improving and then selling to make a profit is an exceptional example. Many times, buyers get a bridge loan in this situation. Bridge loans rarely have prepayment penalties or lock-out clauses. When you are finished with improvements, you can either sell the property or refinance it to pull out the profits.

Lenders get their financing from a variety of sources. One type of lender gets their financing from a group of private investors. Other times, they have big mortgage funds, similar to mutual funds. Since these are already assembled, these lenders tend to close deals faster. If a borrower is turned down by a standard lending institution (this could be a bank, credit union, savings and loan institute, or a direct mortgage lender) a hard money lender can be an excellent option. Be sure to investigate all your options before you make any decisions. It is important that you are prepared in case you need additional financing once your business is up and running. Some business owners prefer to wait and follow a path that is traditional. Other business owners are ready to get things done and don’t want to wait for a traditional loan to come through. When you need financing quickly and with minimal paperwork, be sure to consider a hard money lender.